The new observation status: The good, the bad and the ugly

Well it's happened again. Just when you thought it was safe to go back in the water,
CMS has developed a new definition of inpatient status, new rules and regulations—all
of course to benefit our patients.

But this new definition is not so concisely defined. Night is day and day is night
(unless your patient is admitted at 1 a.m.!). The Greek goddess of chaos, Eris, throws
her apple of discord at your feet. It looks so delicious that you think just a nibble
won't hurt, but eventually it leads to the Trojan War.

Courtesy of James S. Newman.

Our nibble, the interpretation of a few lines in the 1,600-page Inpatient Prospective
Payment System (IPPS) 2014 document, is a chaotic piece of fruit that could lead to
Pandemonium (defined by Milton in “Paradise Lost” as the capital of
Hell).

Every hospital needs admission criteria. This is not a new idea. The first mention
of such criteria in English occurs in a poem, “The HyeWay to the Spyttel House”
from 1536 by James Copland. He describes the Hospital of St. Bartholomew in Smithfield,
England. The Porter or “admissions officer” says,

“Forsooth yea

we do such folke in take

That do aske lodging of our lords sake

And in dede it is our custome and use

Somtyme to take in

and some to refuse.”

They wanted “Old People, and those Men sore wounded by great Vyolence or eaten
with Pokes and Pestilence” but had no use for “Mylchers, Hedge Creepers
or Sham Beggars.”

According to Benjamin Franklin, the first admission criteria in colonial America were
written in 1752 for the Pennsylvania Hospital in Philadelphia. Patients had to be
deemed curable (unless they were “Lunatiks”), require the conveniences
of the hospital (have sufficient severity of illness), and, in some cases, gain pre-approval
from managers. Also, patients with an infectious distemper could not be admitted unless
a proper apartment (isolation) was available.

These were individual institutional rules. Leap ahead another two centuries or so
to 1965. President Lyndon Baines Johnson signed Title XVIII of the Social Security
Act into law. This legislation, a.k.a. “Health Insurance for the Aged and Disabled,”
established Medicare Part A hospital coverage, with a variety of mandates for hospital
admission but ill-defined guidelines. Fee-for-service payments had poor oversight,
and there was little impetus to manage the length of stay; in fact a negative incentive
existed. Observation care did not exist.

In 1983, the first IPPS was instituted, based on Diagnosis- Related Groups (DRGs)
instead of fee-for-service. Peer Review Organizations issued payment denials. Many
hospitals turned to the ill-defined “observation status” to avoid denials
and allow fee-for-service. Eventually observation became better defined in 1998, with
CMS offering the suggestion that a 24- to 48-hour window was appropriate. Later, Recovery
Audit Contractors began enforcing this concept, with the first audits occurring in
2005.

Now we come to the IPPS 2014, the 2-midnight rule. (See this issue's cover story on
page 10 for more details.) This new rule is intended to limit long observation (OBS)
stays, which we all agree are bad for patients financially; they pay their Part B
copay and don't qualify for skilled nursing care after discharge. But like Eris' apple,
the new system could lead to chaos.

The IPPS 2014 rules went into play Oct. 1. CMS granted an extension to get systems
up and running until audit enforcement begins, presumably in April.

Now like Clint Eastwood, squinty eyes and all, let me show you the Good, the Bad and
the Ugly.

The good

This rule “should” make it easier to convert OBS patients to inpatient,
which will benefit the patient. Additionally, in the past, if the status was wrong
in the other direction, and the inpatient should have been OBS, the only option was
Condition Code 44, which would swing the patient back to OBS, but this had to happen
prior to discharge. The new regulation allows this change to occur post-discharge
as a self-audit. This will prevent writeoffs and RAC audits, which would be good.

The bad

A midnight spent in the emergency department or in OBS counts as 1 of the 2 midnights
to obtain inpatient status, but the night does not count towards the 3 midnights needed for skilled nursing placement.
This is very confusing to everybody, especially the patients.

The ugly

Worse is the need to attest and order inpatient status. Without either of these, the
admission will not pass an audit, regardless of the care given. This creates an added,
and I believe unnecessary, burden to clinicians and health care systems.

The new rule specifically calls for attending physicians with admission privileges
to attest and order inpatient status. This means residents, nurse practitioners (NPs)
and physician assistants (PAs), unless they have been granted privileges, cannot place
the order. Additionally, the status determination must be initially made by the privileged
clinician, not a utilization review nurse or case manager.

In other words, physicians will be asked to predict how long a patient will be hospitalized.
Many of us are adept at estimating a length of stay, but from others, this question
will draw creative expletives.

What's next?

Most physicians do not know or frankly care about these new OBS rules, making the
education effort extreme. In every teaching institution in America, hospital administrations
are scrambling to figure out how an attending physician will sign this order. Hospitals
that use NPs or PAs to admit patients are trying to decide whether they will be credentialed.
Making it all the more complex, the rules are still ill-defined and subject to change
and clarification.

So there we have it. CMS, playing the role of Eris, has given us a presumably well-meaning
apple. Will it be nutritious and limit long OBS stays, or will it lead to enhanced
chaos and discordance in hospital admissions? To quote Mel Brooks, “Hope for
the best. Expect the worst. Life is a play. We're unrehearsed.”

Dr. Newman is a hospitalist at Mayo Clinic in Rochester, Minn., and the editorial
advisor for ACP Hospitalist.

ACP Hospitalist provides news and information for hospitalists, covering the major issues in the field. All published material, which is covered by copyright, represents the views of the contributor and does not reflect the opinion of the American College of Physicians or any other institution unless clearly stated.